Calista Enterprises Ltd. v. Tenza Trading Ltd., No. 3:13-cv-01045-SI (D. Or. Aug. 26, 2014) [click for opinion]
The lawsuit was initially filed by Seychelles company Calista Enterprises against Cyprus company Tenza Trading. Almost a year after filing, Tenza filed an amended answer and counterclaim that added the sole-shareholder of Calista, Czech citizen Alexander Zhukov, as a counterclaim defendant and alleged an alter ego theory based on deposition testimony of Mr. Zhukov obtained in his native Czech Republic. Tenza then unsuccessfully moved for a default judgment against Zhukov, which was denied without prejudice after the attorneys representing Calista made a special appearance to contest that motion. Subsequent to the denial of this motion, Tenza asked these attorneys if they would accept service of the amended answer and counterclaims on behalf of Zhukov, but the attorneys refused to do so. Tenza then brought the instant motion to authorize alternative service underFederal Rule of Civil Procedure 4(f)(3) by (1) service on the attorneys; (2) mail to the Czech Republic or Russia; or (3) email.
Rule 4(f) allows for service via three primary methods (1) internationally agreed upon means of service (e.g., the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters); (2) if there is no international agreement, pursuant to local law, through letters rogatory, or by personal or mail delivery (unless prohibited by the foreign country); and (3) by other means pursuant to court order. The court explained that none of the alternative means of service are preferred over others and noted that service by “other means” can be authorized even without efforts to serve via the traditional methods. It emphasized that the decision to allow such alternate service is committed to the sound discretion of the court and recognized the wide variety of alternative methods that may be employed if authorized by the court and not prohibited by international agreement (e.g., publication, mail, delivery to attorney and email).
With respect to the Hague Service Convention, when applicable, compliance is mandatory. Importantly, however, the Convention does not apply when service is effected domestically. As set out inVolkswagenwerk (along with other cases), service on a foreign company through its domestic subsidiary has been deemed effective, despite the Convention, as long as that service complied with the due process requirement of sufficient notice on the foreign parent. Here, the Convention would be similarly inapplicable if service were effected on lawyers in the United States.
Turning to whether substitute service should be made through the foreign defendant’s attorneys, mail, or email, the court concluded that the request for service upon the foreign individual’s U.S. attorneys was “the least problematic.” The court explained that, because it would be completed in the U.S., it would not trigger the Convention. And the court further concluded that it would satisfy due process because the foreign individual already had actual notice of the proceedings and was in regular contact with the attorneys that were also representing his wholly-owned company. As a result, the court authorized service through the attorneys.
The court explained that mail or email service was not appropriate because both of these methods were likely to be completed abroad, either in Russia or the Czech Republic, thus triggering the Hague Service Convention. Service by mail in the Czech Republic was expressly prohibited by the Convention, and, while service by mail in Russia may be allowable under the Convention, it would not satisfy due process because the foreign defendant did not live in Russia and may not receive the mail. In light of the authorization of service through the attorneys, the court denied the request for the more “dubious” mail service. Finally, the court concluded that, because the propriety of email service depended on where the server was located and that information was not before the court, email service should similarly be denied.
Nicholas Kennedy of the Dallas office contributed to this summary.